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Derivatives | 9 Months Ended
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Sep. 30, 2023
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
Derivatives | Derivatives The Company’s operating results are affected by changes to commodity prices. The Trade and Renewables businesses have established “unhedged” futures position limits (the amount of a commodity, either owned or contracted for, that does not have an offsetting derivative contract). To reduce the exposure to market price risk on commodities owned and forward purchase and sale contracts, the Company enters into exchange traded commodity futures and options contracts and over-the-counter forward and option contracts with various counterparties. These contracts are primarily traded via regulated commodity exchanges. The Company’s forward purchase and sales contracts are for physical delivery of the commodity in a future period. Contracts to purchase commodities from producers generally relate to the current or future crop years for delivery periods quoted by regulated commodity exchanges. Most contracts for the sale of commodities to processors or other commercial consumers generally do not extend beyond one year. Most of these contracts meet the definition of derivatives. While the Company considers its commodity contracts to be effective economic hedges, the Company does not designate or account for its commodity contracts as hedges as defined under current accounting standards. The Company primarily accounts for its commodity derivatives at estimated fair value. The estimated fair value of the commodity derivative contracts that require the receipt or posting of cash collateral is recorded on a net basis (offset against cash collateral posted or received, also known as margin deposits) within commodity derivative assets or liabilities. Management determines fair value based on exchange-quoted prices and in the case of its forward purchase and sale contracts, estimated fair value is adjusted for differences in local markets and non-performance risk. For contracts for which physical delivery occurs, balance sheet classification is based on estimated delivery date. For futures, options and over-the-counter contracts in which physical delivery is not expected to occur but, rather, the contract is expected to be net settled, the Company classifies these contracts as current or noncurrent assets or liabilities, as appropriate, based on the Company’s expectations as to when such contracts will be settled. Realized and unrealized gains and losses in the value of commodity contracts (whether due to changes in commodity prices, changes in performance or credit risk, or due to sale, maturity or extinguishment of the commodity contract) and commodity inventories are included in cost of sales and merchandising revenues. Generally accepted accounting principles permit a party to a master netting arrangement to offset fair value amounts recognized for derivative instruments against the right to reclaim cash collateral or obligation to return cash collateral under the same master netting arrangement. The Company has master netting arrangements for its exchange traded futures and options contracts and certain over-the-counter contracts. When the Company enters into a future, option or an over-the-counter contract, an initial margin deposit may be required by the counterparty. The amount of the margin deposit varies by commodity. If the market price of a future, option or an over-the-counter contract moves in a direction that is adverse to the Company’s position, an additional margin deposit, called a maintenance margin, is required. The margin deposit assets and liabilities are included in short-term commodity derivative assets or liabilities, as appropriate, in the Condensed Consolidated Balance Sheets. The following table presents a summary of the estimated fair value of the Company’s commodity derivative instruments that require cash collateral and the associated cash posted/received as collateral. The net asset or liability positions of these derivatives (net of their cash collateral) are determined on a counterparty-by-counterparty basis and are included within Condensed Consolidated Balance Sheets in Commodity derivative assets (liabilities) - current or if long-term in nature, Other assets, net or Other long-term liabilities:
(in thousands) | September 30, 2023 |  | December 31, 2022 |  | September 30, 2022
Cash collateral paid | $ | 16,121 |  |  | $ | 64,530 |  |  | $ | 152,603 |
Fair value of derivatives | 38,203 |  |  | (10,014) |  |  | (42,578) |
Net derivative asset position | $ | 54,324 |  |  | $ | 54,516 |  |  | $ | 110,025 |
The following table presents, on a gross basis, current and non-current commodity derivative assets and liabilities:
| September 30, 2023
(in thousands) | Commodity Derivative Assets - Current |  | Commodity Derivative Assets - Noncurrent |  | Commodity Derivative Liabilities - Current |  | Commodity Derivative Liabilities - Noncurrent |  | Total
Commodity derivative assets | $ | 301,990 |  |  | $ | 4,730 |  |  | $ | 12,733 |  |  | $ | 101 |  |  | $ | 319,554 |
Commodity derivative liabilities | (78,516) |  |  | (396) |  |  | (155,244) |  |  | (1,669) |  |  | (235,825) |
Cash collateral paid | 16,121 |  |  | — |  |  | — |  |  | — |  |  | 16,121 |
Balance sheet line item totals | $ | 239,595 |  |  | $ | 4,334 |  |  | $ | (142,511) |  |  | $ | (1,568) |  |  | $ | 99,850 |
| December 31, 2022
(in thousands) | Commodity Derivative Assets - Current |  | Commodity Derivative Assets - Noncurrent |  | Commodity Derivative Liabilities - Current |  | Commodity Derivative Liabilities - Noncurrent |  | Total
Commodity derivative assets | $ | 325,762 |  |  | $ | 1,796 |  |  | $ | 18,426 |  |  | $ | 686 |  |  | $ | 346,670 |
Commodity derivative liabilities | (94,704) |  |  | (149) |  |  | (116,945) |  |  | (1,484) |  |  | (213,282) |
Cash collateral paid | 64,530 |  |  | — |  |  | — |  |  | — |  |  | 64,530 |
Balance sheet line item totals | $ | 295,588 |  |  | $ | 1,647 |  |  | $ | (98,519) |  |  | $ | (798) |  |  | $ | 197,918 |
| September 30, 2022
(in thousands) | Commodity Derivative Assets - Current |  | Commodity Derivative Assets - Noncurrent |  | Commodity Derivative Liabilities - Current |  | Commodity Derivative Liabilities - Noncurrent |  | Total
Commodity derivative assets | $ | 529,456 |  |  | $ | 7,743 |  |  | $ | 24,143 |  |  | $ | 1,488 |  |  | $ | 562,830 |
Commodity derivative liabilities | (179,962) |  |  | (1,008) |  |  | (161,311) |  |  | (5,985) |  |  | (348,266) |
Cash collateral paid | 152,603 |  |  | — |  |  | — |  |  | — |  |  | 152,603 |
Balance sheet line item totals | $ | 502,097 |  |  | $ | 6,735 |  |  | $ | (137,168) |  |  | $ | (4,497) |  |  | $ | 367,167 |
The net pretax gains and losses on commodity derivatives not designated as hedging instruments included in the Company’s Condensed Consolidated Statements of Operations and the line items in which they are located are as follows:
| Three months ended September 30, |  | Nine months ended September 30,
(in thousands) | 2023 |  | 2022 |  | 2023 |  | 2022
Gains (losses) on commodity derivatives included in Cost of sales and merchandising revenues | $ | (26,918) |  |  | $ | (169,478) |  |  | $ | (49,659) |  |  | $ | 94,708 |
The Company's volumes of commodity derivative contracts outstanding (on a gross basis) are as follows:
| September 30, 2023
(in thousands) | Number of Bushels |  | Number of Gallons |  |  |  | Number of Tons
Non-exchange traded: |  |  |  |  |  |  |
Corn | 546,004 |  |  | — |  |  |  |  | — |
Soybeans | 66,884 |  |  | — |  |  |  |  | — |
Wheat | 114,195 |  |  | — |  |  |  |  | — |
Oats | 24,712 |  |  | — |  |  |  |  | — |
Ethanol | — |  |  | 217,092 |  |  |  |  | — |
Dried distillers grain | — |  |  | — |  |  |  |  | 669 |
Soybean meal | — |  |  | — |  |  |  |  | 686 |
Other | 9,734 |  |  | 26,632 |  |  |  |  | 2,295 |
Subtotal | 761,529 |  |  | 243,724 |  |  |  |  | 3,650 |
Exchange traded: |  |  |  |  |  |  |
Corn | 158,900 |  |  | — |  |  |  |  | — |
Soybeans | 36,135 |  |  | — |  |  |  |  | — |
Wheat | 106,068 |  |  | — |  |  |  |  | — |
Oats | 1,865 |  |  | — |  |  |  |  | — |
Ethanol | — |  |  | 121,002 |  |  |  |  | — |
Propane | — |  |  | 108,990 |  |  |  |  | — |
Other | — |  |  | 672 |  |  |  |  | 779 |
Subtotal | 302,968 |  |  | 230,664 |  |  |  |  | 779 |
Total | 1,064,497 |  |  | 474,388 |  |  |  |  | 4,429 |
| December 31, 2022
(in thousands) | Number of Bushels |  | Number of Gallons |  |  |  | Number of Tons |  |
Non-exchange traded: |  |  |  |  |  |  |  |  |
Corn | 567,405 |  |  | — |  |  |  |  | — |  |  |
Soybeans | 56,608 |  |  | — |  |  |  |  | — |  |  |
Wheat | 102,716 |  |  | — |  |  |  |  | — |  |  |
Oats | 24,710 |  |  | — |  |  |  |  | — |  |  |
Ethanol | — |  |  | 178,935 |  |  |  |  | — |  |  |
Dried distillers grain | — |  |  | — |  |  |  |  | 449 |  |  |
Soybean meal | — |  |  | — |  |  |  |  | 570 |  |  |
Other | 10,054 |  |  | 44,547 |  |  |  |  | 2,029 |  |  |
Subtotal | 761,493 |  |  | 223,482 |  |  |  |  | 3,048 |  |  |
Exchange traded: |  |  |  |  |  |  |  |  |
Corn | 170,280 |  |  | — |  |  |  |  | — |  |  |
Soybeans | 46,380 |  |  | — |  |  |  |  | — |  |  |
Wheat | 111,567 |  |  | — |  |  |  |  | — |  |  |
Oats | 365 |  |  | — |  |  |  |  | — |  |  |
Ethanol | — |  |  | 94,206 |  |  |  |  | — |  |  |
Propane | — |  |  | 47,208 |  |  |  |  | — |  |  |
Other | — |  |  | 588 |  |  |  |  | 581 |  |  |
Subtotal | 328,592 |  |  | 142,002 |  |  |  |  | 581 |  |  |
Total | 1,090,085 |  |  | 365,484 |  |  |  |  | 3,629 |  |  |
| September 30, 2022
(in thousands) | Number of Bushels |  | Number of Gallons |  |  |  | Number of Tons
Non-exchange traded: |  |  |  |  |  |  |
Corn | 628,346 |  |  | — |  |  |  |  | — |
Soybeans | 120,182 |  |  | — |  |  |  |  | — |
Wheat | 60,877 |  |  | — |  |  |  |  | — |
Oats | 31,147 |  |  | — |  |  |  |  | — |
Ethanol | — |  |  | 196,660 |  |  |  |  | — |
Dried distillers grain | — |  |  | — |  |  |  |  | 391 |
Soybean meal | — |  |  | — |  |  |  |  | 483 |
Other | 9,449 |  |  | 30,747 |  |  |  |  | 3,448 |
Subtotal | 850,001 |  |  | 227,407 |  |  |  |  | 4,322 |
Exchange traded: |  |  |  |  |  |  |
Corn | 206,705 |  |  | — |  |  |  |  | — |
Soybeans | 68,520 |  |  | — |  |  |  |  | — |
Wheat | 87,580 |  |  | — |  |  |  |  | — |
Oats | 1,450 |  |  | — |  |  |  |  | — |
Ethanol | — |  |  | 91,770 |  |  |  |  | — |
Propane | — |  |  | 50,904 |  |  |  |  | — |
Other | 145 |  |  | 1,638 |  |  |  |  | 632 |
Subtotal | 364,400 |  |  | 144,312 |  |  |  |  | 632 |
Total | 1,214,401 |  |  | 371,719 |  |  |  |  | 4,954 |
Interest Rate and Other Derivatives The Company’s objectives for using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish these objectives, the Company primarily uses interest rate swaps as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. The gains or losses on the derivatives designated as hedging instruments are recorded in Other comprehensive income (loss) and subsequently reclassified into interest expense in the same periods during which the hedged transaction affects earnings. Amounts reported in accumulated other comprehensive income related to derivatives will be reclassified to interest expense as interest payments are made on the Company’s variable-rate debt. The Company had recorded the following amounts for the fair value of the other derivatives:
(in thousands) | September 30, 2023 |  | December 31, 2022 |  | September 30, 2022
Derivatives not designated as hedging instruments |  |  |  |  |
Foreign currency contracts included in Other current assets (liabilities) | $ | (1,714) |  |  | $ | (3,124) |  |  | $ | (5,685) |
Derivatives designated as hedging instruments |  |  |  |  |
Interest rate contracts included in Other current assets | $ | 12,026 |  |  | $ | 8,759 |  |  | $ | 6,925 |
Interest rate contracts included in Other assets | 29,952 |  |  | 22,641 |  |  | 25,669 |
The recording of gains and losses on other derivatives and the financial statement line in which they are located are as follows:
| Three months ended September 30, |  | Nine months ended September 30,
(in thousands) | 2023 |  | 2022 |  | 2023 |  | 2022
Derivatives designated as hedging instruments |  |  |  |  |  |  |
Interest rate derivative gains included in Other comprehensive income | $ | 7,981 |  |  | $ | 14,282 |  |  | $ | 10,571 |  |  | $ | 39,746 |
Interest rate derivative gains (losses) included in Interest expense, net | 2,734 |  |  | 210 |  |  | 7,354 |  |  | (2,420) |
Outstanding interest rate derivatives, as of September 30, 2023, are as follows:
Interest Rate Hedging Instrument |  | Year Entered |  | Year of Maturity |  | Initial Notional Amount (in millions) |  | Description |  | Interest Rate
Long-term |  |  |  |  |  |  |  |  |  |
Swap |  | 2019 |  | 2025 |  | $ | 95.3 |  |  | Interest rate component of debt - accounted for as a hedge |  | 2.3%
Swap |  | 2019 |  | 2025 |  | $ | 47.7 |  |  | Interest rate component of debt - accounted for as a hedge |  | 2.4%
Swap |  | 2019 |  | 2025 |  | $ | 47.7 |  |  | Interest rate component of debt - accounted for as a hedge |  | 2.4%
Swap |  | 2020 |  | 2030 |  | $ | 50.0 |  |  | Interest rate component of debt - accounted for as a hedge |  | 0.0% to 0.8%
Swap |  | 2020 |  | 2030 |  | $ | 50.0 |  |  | Interest rate component of debt - accounted for as a hedge |  | 0.0% to 0.8%
Swap |  | 2022 |  | 2025 |  | $ | 20.0 |  |  | Interest rate component of debt - accounted for as a hedge |  | 2.6%
Swap |  | 2022 |  | 2029 |  | $ | 100.0 |  |  | Interest rate component of debt - accounted for as a hedge |  | 2.0%
Swap |  | 2022 |  | 2029 |  | $ | 50.0 |  |  | Interest rate component of debt - accounted for as a hedge |  | 2.4%
Swap |  | 2023 |  | 2024 |  | $ | 50.0 |  |  | Interest rate component of debt - accounted for as a hedge |  | 3.7%
Swap |  | 2023 |  | 2025 |  | $ | 50.0 |  |  | Interest rate component of debt - accounted for as a hedge |  | 3.7%
Swap |  | 2023 |  | 2031 |  | $ | 50.0 |  |  | Interest rate component of debt - accounted for as a hedge |  | 2.9%

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